Break-even calculator

Break-even analysis determines the point where total revenue equals total costs, meaning zero profit and zero loss. For ecommerce, it tells you how many units you need to sell (or how much revenue you need) to cover all your fixed and variable costs. Everything sold beyond break-even is profit.

Fixed costs don't change with sales volume. Common ecommerce fixed costs: platform subscriptions ($29-$399/mo), hosting ($5-$500/mo), email marketing tools, app subscriptions, salaries, rent, insurance, and software tools. Total fixed costs for small ecommerce businesses typically range from $500 to $5,000+ per month.

Variable costs increase with each sale. Common variable costs: cost of goods sold (COGS), shipping per order, payment processing (2.5-3.5%), packaging, platform transaction fees (0-2%), returns processing, and customer acquisition cost. Variable cost per unit typically represents 30-70% of the selling price.

Break-even units = Fixed Costs / (Price per Unit - Variable Cost per Unit). The denominator (Price - Variable Cost) is called the 'contribution margin'. It represents how much each sale contributes toward covering fixed costs. Once you've sold enough units to cover all fixed costs, you've broken even.

Three strategies: (1) Reduce fixed costs by auditing subscriptions and negotiating rates. (2) Increase price by improving branding, adding value, and reducing discounting. (3) Reduce variable costs by negotiating supplier pricing, optimizing shipping, and reducing returns. Even small changes compound: reducing COGS by $5 and increasing price by $5 can cut break-even by 20-30%.

Contribution margin = (Price - Variable Cost) / Price. For ecommerce, 40-60% is healthy, 60%+ is excellent. Digital products can reach 80-90%. Low margins (under 30%) mean you need high volume to break even. If your contribution margin is below 20%, reconsider your pricing strategy or cost structure.

Most ecommerce businesses aim to break even within 6-18 months. Under 6 months is excellent. 12-18 months is normal for businesses investing in growth. Over 24 months may signal pricing or cost structure problems. The timeline depends on your niche, marketing spend, and growth rate.

It depends. A fixed monthly ad budget (e.g., $500/mo regardless of sales) is a fixed cost. Performance marketing tied to sales (e.g., $10 CPA per acquisition) is a variable cost. Many businesses have both: a base marketing spend (fixed) plus performance-based spend (variable). Include the base in fixed costs and per-order acquisition cost in variable costs.

Break-even is the starting line. Once you pass it, every additional sale generates profit equal to the contribution margin. If your contribution margin is $45/unit and you sell 20 units beyond break-even, that's $900 in profit. Understanding break-even helps you set realistic sales targets and evaluate pricing changes.

Use a weighted average approach. Calculate the average selling price and average variable cost across your product mix. Or use this calculator's revenue-based view: enter your total fixed costs, average price, and average variable cost. For more precision, calculate break-even for each product line separately.